The Lok Sabha on 27 December 2017 passed the GST (Compensation to States) Amendment Bill, 2017. The Bill is aimed at increasing the tax on luxury vehicles from 15 per cent to 25 per cent.

The Bill was passed amid uproar by the opposition over controversial comments made by Union Minister Anant Kumar Hegde on secularism and the Constitution.

The Bill seeks to replace the Ordinance issued in September 2017 to give effect to the decision of the GST Council. The Ordinance provided for a hike in the GST cess on a range of cars from mid-size to hybrid variants and the luxury ones to 25 per cent.

The funds collected following hike in cess on luxury vehicles will be used to compensate states for revenue loss on account of implementation of the Goods and Services Tax (GST).

The Bill was introduced in Lok Sabha by Arun Jaitley on 22 December 2017.
BackgroundThe Bill amends the Goods and Services Tax (Compensation to States) Act, 2017 to increase the cap on the GST Compensation Cess levied on motor vehicles from 15 per cent to 25 per cent.

The Act enables the central government to notify the rate of the Goods and Services Tax (GST) Compensation Cess on items such as pan masala, coal, aerated drinks, and tobacco, subject to certain caps. The amount received by levying the GST Compensation Cess is used to compensate states for any loss in revenue following the implementation of GST.